To calculate Units of Production depreciation

Units of production (UOP) is a depreciation method for an asset whose life is recorded in units rather than periods.

This method must be used only when total units of output of an asset can be estimated with accuracy over the life of the asset.

The calculation bases depreciation on the relative amount of units used since the last depreciation, compared to the life of the asset expressed in units.

For example, an asset using a UOP method has a cost of $100,000 and a life of 20,000. If you depreciate 100 units during this period, the depreciation amount results in $100,000 * (100/20,000) = $500.

Depreciating an asset by using the units of the production method requires you to allocate the number of units used evenly over the time being depreciated. Usually, you enter units used and the depreciation for one period. When this happens the units used are depreciated in that single period.

You can also enter the units used value and run depreciation for more than one period. This spreads the depreciation of those units evenly over the periods being depreciated.

For example, if you enter units used of 96 units, and then depreciate from 1/1/99 thru 2/28/99, the 96 units are spread evenly over the two periods:

  • Using periodic depreciation you have 48 units depreciated each period.
  • Using daily depreciation you have 31/59 * 96 = 50.44 rounded to 50 units the first period and 28/59 * 96 = 45.55 rounded to 46 units for the second period.

The following formulas are used:

  • U.S. tax books:
Depreciation = (cost - salvage - sec179) * (business percentage/100)*(units to
depreciate/total units)
  • Other books:
Depreciation = (cost - salvage) * (units to depreciate/total units)

For MACRS and ACRS the salvage value is not applied to depreciation of U.S. tax and commercial books.